1 essentials of planning. what is planning? planning –involves defining the organization’s...

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Essentials of Planning

What Is Planning?

• Planning– involves defining the organization’s goals,

establishing an overall strategy, and developing a comprehensive set of plans to integrate and coordinate organizational work

– informal planning - nothing is written down• little or no sharing of goals• general and lacking in continuity

– formal planning - written• defines specific goals• specific action programs exist to achieve goals© Prentice Hall, 2002

Reduce theImpact of

Change

Reduce theImpact of

Change

ProvideDirectionProvide

Direction

Minimize Waste /

Redundancy

Minimize Waste /

Redundancy

Set ControlStandards

Set ControlStandards

Reasonsfor Planning

Reasonsfor Planning

Growing complexities

Growing complexities

Growth of trade unionGrowth of trade union

Rapid socio-Economicchanges

Rapid socio-Economicchanges

Need for R&D activity

Need for R&D activity

What Planning Accomplishes /Benefits of Planning

• Allows decisions to be made ahead of time.• Permits anticipation of consequences.• Provides direction and a sense of purpose.• Provides a unifying framework; avoiding piecemeal decision

making.• Improves competitive strength• Achieves better coordination• Helps identify threats and opportunities and reduces risks.• Facilitates managerial control through the setting of standards for

monitoring and measuring performance.• Encourages innovation & creativity

ArgumentsArgumentsAgainstAgainst

StrategicStrategicPlanningPlanning

Rigid Assumptions Rigid Assumptions of Stabilityof Stability

IntuitionIntuitionand Creativityand Creativity

EnvironmentalEnvironmentalTurbulenceTurbulence

Focus on Today’s Focus on Today’s CompetitionCompetition

Preoccupation withPreoccupation withCurrent SuccessCurrent Success

Does Planning Improve Performance?

• Financial results

• Environmental concerns

• Quality and implementation

Why Do Managers Plan?/ Importance of planning

• Purposes of Planning– Planning is the primary management function that

establishes the basis for all other management functions– Planning establishes coordinated effort– Planning reduces uncertainty– Planning reduces overlapping and wasteful activities– Manage complexities & competition– Planning establishes goals and standards used in controlling– To increase org effectiveness

Why Do Managers Plan? (cont.)

• Planning and Performance– Generally speaking, formal planning is associated with:

• Higher return on assets• Higher profits

– Quality of the planning process and the appropriate implementation of the plans probably contribute more to high performance than does the extent of planning

– External environment may undermine the effects of formal planning

– Planning/performance relationship is influenced by the planning time frame

Definition of Planning• Weihrich & Koontz “Planning involves selecting missions and

objectives and the actions to achieve them; it requires decision making, that is, choosing from among alternative future courses of action”.

• McFarland “Planning may be broadly defined as a concept of executive action that embodies the skills of anticipating, influencing & controlling the nature &direction of change”.

• Terry “Planning is the selection & relating of fact & making & using of assumption regarding the future in the visualisation & formation of proposed activities believed necessary to achieve desired result.”

Features/ nature of planning

• Planning is an intellectual process• Planning determines the future course of action• Primarily concerned with looking into future• Involves selection of suitable course of action, means there are

several alternatives for achieving objectives• All levels are concerned with the determination of future course of

action.• Planning is the most basic to all mgmt functions• Planning is pervasive function of mgmt• Planning is flexible because future is always dynamic• Planning is a pervasive & continuous managerial function involving

complex processes of perception, analysis, conceptual thought, communication, decision,& action

Benefits of planning

• Reduces uncertainty• Encourage innovation & creativity• Improves motivation• Achieve better coordination• Facilitates control• Planning leads to success• Focuses attention

Missionor Purposes,

(2) Objectives or goals,

(3) Strategies,

(4) Policies,

(5) Procedures,

(6) Rules,

(7) Programs, and

(8) Budgets

(1)

Hierarchy Of Plans

Hierarchy of Plans (cont..)

Plans can be classified as (1) mission or purposes, (2) objectives or goals, (3) strategies, (4) policies, (5) procedures, (6) rules, (7) programs, and (8) budgets

Hierarchy of Plans (cont..)

• The mission, or purpose, identifies the basic purpose or function or tasks of an enterprise or agency or any part of it

• Objectives, or goals, are the ends toward which activity is aimed• Strategy is the determination of the basic long‑term objectives of

an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals

• Policies are general statements or understandings that guide or channel thinking in decision making

• Procedures are plans that establish a required method of handling future activities

Hierarchy of Plans – cont.

• Rules spell out specific required actions or non actions, allowing no discretion• Programs are a complex of goals, policies, procedures, rules, task

assignments, steps to be taken, resources to be employed, and other elements necessary to carry out a given course of action

• A budget is a statement of expected results expressed in numerical terms

Steps in Planning

1. Being Aware of Opportunities 2. Establishing Objectives or Goals3. Developing Premises 4: Identify / Determining Alternative Courses 5. Evaluating Alternative Courses 6. Selecting a Course 7. Formulating Derivative Plans8. Quantifying Plans by Budgeting

STEPS IN PLANNING

• Being aware of opportunity :In light of Market, Competition Customer desire, Our strengths Our weaknesses

• Setting objectives or goals: Where we want to be& what we want to accomplish & when

• Considering planning premises: In what environment will our plans operate• Identifying alternatives: What are the most promising alternatives to

accomplishing our objectives• Comparing alternatives in light of goals sought Which alternative meets our

goals at lowest cost &at highest profit• Choosing an alternative Selecting the course of action• Formulating derivative plans such plans as to :- Buy equipment Buy

materials, Hire& train workers, • Budgets: Develop such budgets as Volume & price of sales, operating

expenses necessary for plans, Capital expenditure

Types Of Plans

Breadth

StrategicOperational

Specificity

DirectionalSpecific

Frequency of Use

Single useStanding

Time Frame

Long termShort term

© Prentice Hall, 2002

Types Of Plans

– Types of Plans based on Breadth• strategic plans - apply to the entire organization

– establish organization’s overall goals– seek to position the organization in terms of its environment

• operational plans - specify the details of how the overall goals are to be achieved

– tend to cover short time periods


Types Of Plans

– Types of Plans based on Time• long-term plans - time frame beyond three years

– definition of long term has changed with increasingly uncertain organizational environments

• short-term plans - cover one year or less– Types of Plans based on specification

• specific plans - clearly defined with little room for interpretation

– required clarity and predictability often do not exist

• directional plans - flexible plans that set out general guidelines

– provide focus without limiting courses of action © Prentice Hall, 2002

Specific Versus Directional Plans


Types Of Plans

– Types of Plans based on frequency of use• single-use plans - one-time plans specifically designed to meet

the needs of a unique situation• standing plans - ongoing plans that provide guidance for

activities performed repeatedly– include policies, procedures, and rules

© Prentice Hall, 2002 7-7-2222

Planning In The Hierarchy Of Organizations

StrategicPlanning

OperationalPlanning

TopExecutives

Middle-LevelManagers

First-LevelManagers


Developing Plans (cont.)

– Approaches to Planning• traditional, top-down approach

– planning done by top managers– formal planning department - specialists whose sole responsibility is to

help to write organizational plans– plans flowed down to lower levels

» tailored to particular needs at each lower level– most effective if plan is a workable document used by organizational

members for direction and guidance



– Approaches to Planning (cont.)• inclusive approach

– employees at each level develop plans suited to their needs

– employees acquire greater sense of the importance of planning when they participate in the process

– plans more likely to be used in directing and coordinating work


Principles of planning based on Purpose

and Nature Of Planning

. Principle of contribution to objectives: Purpose of every plan & all supporting plans is to promote accomplishment of enterprise objectives

. Principle of objectives: If objectives have to be meaningful to people, they must be clear, attainable, & verifiable

. Principle of primacy of planning.:... Planning logically precedes all other managerial functions

. Principle of efficiency of plans: Efficiency of a plan is measured by the amount it contributes to purpose & objectives as offset by the costs required to formulate and operate it and by unsought consequences.

Principles--the Structure Of Plans . Principle of planning Premises: The more thoroughly the individuals who are charged with planning, understand and agree to utilize consistent planning premises, the more coordinated enterprise planning will be . Principle of the strategy and policy frame work: The

more strategies and policies are clearly understood and implemented in practice, the more consistent and effective will be the frame work of enterprise plans

Principles--the Process Of Planning

. Principle of limiting factor: In choosing among alternatives, the more accurately individuals can recognize and solve for those factors which are limiting or. critical to attainment of desired goals, the more easily and accurately they can select the most favorable alternative

. The commitment principle: Logical planning should cover a period of time in the future necessary to foresee as well as possible, through a series of actions, the fulfillment of commitments involved in a decision made today

Principles--the Process Of Planning (Cont..)

. Principle of flexibility...:. Building flexibility into plans will lessen danger of losses incurred through unexpected events, but cost of flexibility should be weighed against its advantages. Principle of navigational change: The more that planning decisions commit individuals to a future path, the more important it is to check on events and expectations periodically and redraw plans as necessary to maintain a course toward a desired goal

Developing Plans

– Contingency Factors in Planning• level in the organization

– operational planning dominates managers’ planning efforts at lower levels

– strategic planning more characteristic of planning at higher levels



– Contingency Factors in Planning (cont.)• degree of environmental uncertainty

– when uncertainty is high, plans should be specific, but flexible

• length of future commitments– commitment concept - plans should extend far enough to meet those

commitments made when the plans were developed» the more that current plans affect future commitments, the

longer the time frame for which managers should plan


Contemporary Issues In Planning

• Criticisms of Planning– 1. Planning may create rigidity

• unwise to force a course of action when the environment is fluid

– 2. Plans can’t be developed for a dynamic environment• flexibility required in a dynamic environment• can’t be tied to a formal plan

– 3. Formal plans can’t replace intuition and creativity• mechanical analysis reduces the vision to some type of programmed

routine


Contemporary Issues In Planning (cont.)

• Criticisms of Planning (cont.)– 4. Planning focuses managers’ attention on today’s

competition, not on tomorrow’s survival• plans concentrate on capitalizing on existing business opportunities• hinders managers who consider creating or reinventing an industry

– 5. Formal planning reinforces success, which may lead to failure

• success may breed failure in an uncertain environment


Contemporary Issues In Planning (cont.)

• Effective Planning in Dynamic Environments– develop plans that are specific, but flexible– recognize that planning is an ongoing process– change directions if environmental conditions

warrant– stay alert to environmental changes


Barriers to effective planning• Difficulty of accurate premising• Problems of rapid change• Internal inflexibilities

policy & procedural inflexibilitycapital investment

• External inflexibilitypolitical climatetrade unionstechnology changes

• Time & cost factors• Failure of people in planning

How Do Managers Plan?

• The Role of Goals and Plans in Planning– goals - desired outcomes

• provide direction for all management decisions• represent the criteria against which actual work accomplishments can

be measured– plans - outline how goals are going to be met– Types of Goals

• all organizations have multiple objectives• no single measure can evaluate whether an organization is successful• financial goals - relate to financial performance• strategic goals - relate to other areas of performance 7-7-3636

Stated Objectives From Large US Companies


How Do Managers Plan? (cont.)

• The Role of Goals and Plans in Planning (cont.)– Types of Goals (cont.)

• stated goals - official statements of the organization’s goals

• real goals - those goals that an organization actually pursues


Establishing Goals

– Approaches to Establishing Goals• traditional goal setting - overall goals established at the top of the

organization– overall goals broken down into sub-goals for each level of the

organization» higher-level goals must be made more specific at lower levels» network of goals creates a means-ends chain

– Sub-goals constrain subordinates’ behavior» assumes that top managers know what is best for the organization


How Do Managers Plan? (cont.)

• Establishing Goals (cont.)– Approaches to Establishing Goals (cont.)

• management by objectives (MBO) - specific performance goals are jointly determined by employees and their managers

– progress toward accomplishing these goals is periodically reviewed– rewards are allocated on the basis of this progress– MBO consists of four elements

» goal specificity» participative decision making» explicit time period» performance feedback


Traditional Objective Setting

IndividualEmployee’sObjective

TopManagement’s

Objective

DepartmentManager’sObjective

DivisionManager’sObjective

“Increase profits, regardlessof the means”

“I want to see asignificant improvementin this division’s profits”

“We need to improvethe company’s performance”

“Don’t worry aboutquality: just work fast”

Steps in a Typical MBO Program


Establishing Goals (cont.)

– Approaches to Establishing Goals (cont.)• management by objectives (cont.)

– increases employee performance and organizational productivity

» depends on support of top managers for MBO» problems with MBO

- can be useless in times of dynamic change

-overemphasis on personal rather than

organizational goals

-may be viewed simply as an annual exercise

in paperwork



– Characteristics of Well-Designed Goals• should be written in terms of outcomes• should be measurable and quantifiable• should be clear as to a time frame• should be challenging but attainable• should be written down• should be communicated to all organization members who

need to know the goals



– Steps in Goal Setting• 1 - Review the organization’s mission• 2 - Evaluate available resources• 3 - Determine the goals individually or with input from

others– should be congruent with the organizational mission and goals

in other organizational areas

• 4 - Write down the goals and communicate them to all who need to know them

• 5 - Review results and whether goals are being met© Prentice Hall, 2002

Hierarchy of Goals

FIGURE 4–1

Principles of Goal-Setting

Set SMART goals—make them specific, measurable, attainable, relevant, and timely. Choose areas (sales revenue, costs, and so forth) that are relevant and complete.

Assign specific goals. Assign measurable goals. Assign doable but challenging goals. Encourage participation. Use executive assignment action plans, or

management by objectives.

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